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The Western Rules-Based Order is Collapsing. Now What?

Allow me to make a prediction.

Five years from now, the United States will have left NATO, NORAD, NAFTA, the UN, the WTO, the IMF, the World Bank, and every other multilateral organization and trade agreement on the planet.

And there’s a simple reason for it; U.S. President Donald Trump feels that every organization to which his country belongs has ‘taken advantage of the United States’ for decades and the only way to ‘stop the hemorrhaging’ is to quit all those institutions — perhaps forever.

Even if the U.S. decides to retain its UN membership for a time, my point will have been made.

Perhaps the Trump administration will explain its position in an ongoing conversation at the United Nations as to why it’s leaving the other institutions first and then quit the United Nations body last as a final snub to the world community.

Although these undertakings haven’t yet come to fruition, signs are forming that President Trump and his supporters may go the entire distance in separating the United States from the Rest of the World — and that’s especially true if he receives a second ‘mandate’ via the 2018 U.S. midterm elections and a third mandate courtesy of American voters in 2020.

On the Way Out the Door, Grab Everything You Can!

Enroute to leaving every multilateral organization and trade agreement on the planet, Donald Trump the negotiator may tell his people to extract every possible concession, from every possible country, every step of the way.

If you think he won’t… sorry, you’re laughably naive.

Remember, Donald Trump thinks that every country in the world takes advantage of American largesse every day of the year! A team of Harvard lawyers couldn’t convince him otherwise. Therefore, why would he want to stay in any of those political or free trade agreements?

For Mr. Trump, interim negotiations seem nothing more than the necessary steps toward his goal of quitting those institutions completely.

The U.S. Midterm Elections Will Accelerate or Decelerate Trump’s Plans

If the Trump team does well, every country that trades with the United States better have a solid ‘Plan B’ ready to implement the day following the U.S. midterm election. A year later just won’t cut it. This President moves fast.

For G7 and G20 countries, this means ramping-up trade with each other in an attempt to replace the great American marketplace where billions of dollars of foreign goods are purchased every day.

For developing countries, not much will change as most of them have only tiny trade links with the United States.

What Can G7 and G20 Countries Do?

Having failed to grasp the full extent of the Trump determination to pull back from the rest of the world, some countries seem uncertain about what to do next, while others think it will simply ‘blow over’ and business will soon return to normal.

But in Donald’s world, if you’re willing to sign an actual trade deal with his country he then feels he’s left too much money on the table and we’re right back to where we started — the world is taking advantage of the United States and America must never sign such an agreement!

Countries that run large trade surpluses with the United States may start to notice curtailed trade with America, therefore every country must plan for changes in that trading relationship, because, like the song says, ‘The times, they are a changin’ and it’s no fun being stuck with tens of billions of dollars of stuff that you can’t export’ — because U.S. tariffs have made your goods too expensive or the U.S. border is closed to your exports.

For countries with a less than $10 billion trade surplus with the United States, you’re probably pretty safe (for now) unless you start waving a red flag at the Commander in Chief. But if you’re a country that runs double-digit or triple-digit trade surpluses with the Americans, it’s officially time to panic.

Top ten countries that operated a large trade surplus with the U.S.A in 2017 | NOTE: Does not include services | Data courtesy of the U.S. Commerce Dept | Image courtesy of FORTUNE

Strengthen non-U.S. Trading Relationships Now

Perhaps using the recently-signed CETA deal between Canada and the EU as a template, G20 countries could begin to strengthen their trading relationships with each other to the extent that they could survive America severely curtailing their trade. (If it comes to that)

‘Surely that’s an unreachable goal’ some might say, but even if countries miss the ‘unreachable goal’ by 50%, they’re still better off compared to not making the attempt.

Even if it takes the Trump team five years to wrestle trade deficits down to a manageable level (think; $10 billion/yr per country) and even if it takes ten long years for countries to find replacement markets for much of the goods and services they presently sell to the U.S., they’ll still be glad they invested the time and effort.

Countries with double-digit or triple-digit trade surpluses with America that get ahead of the curve are more likely to survive it better, while countries that don’t diversify may find themselves neck-deep in their own exports.